Retirment Considerations Flashcards
Nest
Foundation - 40 plus years - our person inflation and promote confidence in savings and minimise investment shocks
Growth - 10 to 40 - years aims to outperform inflation maximise diversification capture growth and reduce impact of investment shocks
Consolidation less than 10 they want to derisk to CPI + or cash
Investment pathways
They are for clients who are moving from pension savings into drawdown or transferring between drawdown arrangements
- pathway 1 - no plans to touch pension in5 years
- plan to take an annuity in the next 5 years
-pathway 3 - ramie money as long term income in5 years - plan all money to be taken in 5 years
Pans to sponsoring employers
- SIPP and SASS and I
- contract ones can’t
- can’t be 50% of net value of schemes assets
- carry aminkum interest rate of 1%
- not last longer than 5 years a
- they are not satisfied it’s not allowed
With profits
Invested into a with profit fund are invested in all of the asset classes investment growth is governed by the bonuses added by the provider
The rate expressed as a percentage at which the annual bonuses are added depends on how well the company’s investments performed. When they are added they can not be taken away. Terminal ones can be added on Reid’s and but not garuteeed
Lifestylinf
They invest in equities and property to gain growth. These can be virile when trying to purchase an annuity so the funds automatically switch to fixed interest and cash.
They help reduce risk but they may switch in less than ideal market conditions
Volatility and pound cost averaging explained
During accumulation a dip in fund prices is advantageous as the client will get more units for their contribution. This is known as pound cost average. The opposite is tue of deacumation. Low returns at the start of withdrawal reduce the amount left after while the opposite is true jf returns are higher.
This is sequencing of returns risk
Inflation
Considered about 2%
Pensioners are more vulnerable as the goods they purchase such as good are more likely to go up higher than CPi
The pensions act reduced the statory revaluation feeling to 2.5% for pensions accruing in a defined
Sponsoring schemes
- they can only have shares of one sponsoring scheme worth less than 5% is scheme assets
- they can have shares worth less rhan 20% for multiple sponsors
In theory they could own 100% of the scheme if it was less.
They do no like to do it due to risk , illiquidity and also because it may not be in the scheme interst when the pension sells the shares
Loans to schemes
- occupational pension schemes can loan to the employer. But the loan must be secured and be on the Bank of Englands base rate at least.
The amnximum ks 50% Of the net asset before the loan.
Funds of £200,000.00 can loan £100,000.00
I’e could but a property for £250,000.00 as purchasing power of £200,000.000 and £100,000 coudk purchase £300,000.00
But if there’s existing borrowing you take the sun away again
Ie if the SIPP had £30,000 it would be £200,000.00 - £30,000 x 50% - £30,000 so £55,000.00
Taxable property
This is propert that can be moved and is tangible.
Some business goods less than £6,000.00 can be used.
Commercial property is ok
ESG
Environmental - they’re impact kn climate
Governance - how corporations are giver need including who owns them. The tax pis
Social - workforce - child labour diversity and inclusion in the supply chain management
Sustainability funds are all three and pay close attention to these
Impact funds are ones that invest in companies that are trying to tackle things like climate change
Fixed interest for accumulation
- they are bonds and kind issues by governments companies and other official bodies to raise capital. The borrowing finsitiuion pays in interest and capital is paid at the end of a predetermined period
- the short erm gilts are 7 and long term are over 15
Fixed interest securities are undated sometimes meaning there is no date for redemption
Sometimes they pay an indexed linked measured to RPI
- if they are on sale before the redemption date the seeking price will not necessarily be the nominal value
Usually safe, and have a garunteed income
Shares
- they usually perform better long term
- FTSE companies can be tracked on the stock exchange
- small companies are harder to sell as a buyer is required
- they are good in drawdown pensions as they do not benefit from tbe mortality drag and they have higher fees so returns can help
Property
- they can be invested direct into a commercial property or be via day a property unit
- commercials grow over time but tend to be cyclical
- value property investments is usually opposite direction to share
Collective investments
- often in with profits
- they age invested in all of the classes did assets and investment growth is givernened by the bonuses added by the provider
- annual bonuses are added and the rate typically expressed as a percentage or Ed’s on how well the company’s investments have performed. They are set at a rate the provider believes it can expect from the fund over the long term hence the returns in the with profit fund are smoothed. Once an annual bonus has been added it cannot be taken away. A terminal bonus may also be added on retirement or death but this is not guaranteed.
